State leaders hope legislation will spur public-works projects, jobs

Candy Thomson, The Baltimore Sun

The state has a long list of public-works projects but little money. The private sector is willing to invest but has been starved for work.

From that simple equation comes a business model called public-private partnerships — or P3s — that Maryland hopes will help alleviate its backlog of transportation and other infrastructure needs. The O'Malley administration is expected to unveil legislation this week that would offer a channel for tapping into a reservoir of corporate money and expertise.

This version of the bill contains a sweetener last year's failed version didn't have that should entice a business community that doesn't think state government has been friendly enough: provisions to allow unsolicited ideas from the private sector.

It also might offer the mechanism to revive the redevelopment effort at State Center after a judge's ruling last week that voided all contracts critical to the $1.5 billion project near Bolton Hill.

"We have tremendous needs," said Lt. Gov. Anthony G. Brown, the administration's point man on the issue. "The state requires more than $800 million annually in new transportation investment just to address current needs. There's been nothing put forward that raises that kind of money. We need to be innovative and creative. ... We are no longer in a day and age when we shouldn't be considering all options."

A task force chaired by Brown projected that P3s could pay for up to $315 million in projects annually while creating as many as 4,000 jobs. The lieutenant governor envisions a time in the not-too-distant future when the state will be involved in five P3 projects a year.

"We estimate that P3s could contribute between 6 and 10 percent of the state's annual capital budget," he said. "That's 6 to 10 percent in additional resources to do more projects. ... This is not a substitute. This is a supplement, a complement."

A partnership might pay for a $850 million replacement for the 72-year-old Nice Bridge connecting Charles County to Virginia. Light rail lines for Baltimore and the Washington suburbs that are projected to cost a combined $4.7 billion could be partially financed by development at transit stops. School construction and water and sewer projects might also be accomplished using a P3 formula, Brown said.

State officials have two recent success stories they can point to and a failure they'd rather not.

On the plus side: a 50-year deal with Ports America Chesapeake in 2009 that upgraded the Seagirt Marine Terminal to accommodate the world's largest cargo ships, and a 35-year deal last year to rebuild the Interstate 95 travel plazas north of Baltimore. Together, the two partnerships are estimated to be worth $1.5 billion to the state.

Harold Bartlett, executive director of the Maryland Transportation Authority, said that the state had a good deal of leverage in negotiating the travel plazas agreement with Spanish-owned Areas USA.

"They're trying to establish themselves in North America, and getting this Maryland project was a huge deal to them. I think that's why they sharpened their pencils," he said.

On the negative side: the State Center redevelopment project to replace aging buildings with a mixed-use complex. A Baltimore judge sided with property owners who sued over the legality of the selection of a developer. An amendment to untangle the mess attached to last year's P3 bill, which passed the House of Delegates, helped kill the legislation.

The proposed state law sets parameters and requires a front-end review of proposals by the Board of Public Works and the two legislative budget committees. That gives the business community a predictable process. After a bidder is selected, the deal would be subject to another round of review by lawmakers, the Public Works Board and the public.

"For every procurement, you're going to have one very appreciative entity — the winner — and everyone else. We want to ensure that while they may be unhappy with the outcome, they are confident in the fairness of the process because we've been open and transparent," Brown said. "There's going to be a lot more confidence and, in the process, a lot less litigation."

The proposal also includes wage protections, environment and minority business standards and promises of confidentiality for proprietary information.

If the bill passes, Brown said, the governor would establish by executive order a committee of existing staff to identify needs, engage the private sector for its input and provide initial vetting of proposals.

With the exception of Florida and California, not many states have embraced P3s.

Mahlon Apgar IV, a real estate and infrastructure consultant and former assistant secretary of the Army in the Clinton administration, calls P3s a "budget multiplier to solve complex problems that neither the government nor the private sector can do alone."

In the late 1990s, Apgar spearheaded the Army's Residential Communities Initiative to clear a $7 billion backlog in housing and maintenance projects.

A $2 billion pilot project was launched to privatize housing and upgrade and replace substandard units at four installations, including Fort Meade. Picerne Military Housing, a division of a privately owned real estate firm, built or renovated six neighborhoods consisting of townhomes, single-family homes and duplexes at the base. By the end of this year, a $72 million, 14-building apartment complex for single members of the military there will be ready for occupancy.

"These apartments are not something we could build on our own with our dwindling resources," Col. Edward Rothstein, garrison commander at Fort Meade, said in a statement.

Picerne, based in Rhode Island, is also working on a 10-year, $80 million plan to build or renovate more than 1,000 housing units at Aberdeen Proving Ground.

Apgar, who will be the keynote speaker in February at a national public-private partnership conference, said that for the state's P3 program to work it will need a small team of state officials to collaborate with innovators in the private sector.

"Maryland has an enormous opportunity as part of its overall economic strategy to further its goals through P3s," he said. "There's no substitute to having people with business experience, business contacts in the mix. The word, 'partnership,' is the operational one, and partnership goes both ways."